JZ CAPI ZDRP
20 April 2017
JZ CAPITAL PARTNERS LIMITED (the "Company")
(a closed-end collective investment scheme incorporated as a non-cellular
company with limited liability under the laws of Guernsey with registered
number 48761)
Discontinuation of Dividend Policy and Inception of New Strategy
and
Related Recommended Proposals in respect of:
Amendments to the Articles of Incorporation of the Company
Buy Back Authorities
Related Party Transaction in respect of Off-Market Acquisitions
and
Notices of Meeting of CULS Holders,
Separate General Meetings of Ordinary Shareholders and ZDP Shareholders
and Extraordinary General Meeting
Discontinuation of Dividend Policy and Inception of New Strategy
The Board recently launched a review of the Company's existing dividend policy,
following careful consideration as to whether full value for Shareholders is
being achieved.
Introduced in July 2012, the policy seeks to distribute out of profits in each
financial year in the form of dividends an amount equal to approximately three
per cent of the Company's net assets for that financial year. The review was
undertaken in view of the substantial discount to net asset value at which the
Company's Ordinary Shares continue to trade.
Following the review, which included consultation with the Company's largest
Shareholders, the Board has determined that the interests of Shareholders would
be better served through a new strategy which would include the application of
the Company's available distributable profits in the purchase by the Company of
its Ordinary Shares.
Under the new strategy, purchases by the Company of its Ordinary Shares will be
undertaken when opportunities in the market permit, and as the Company's cash
resources allow. Naturally the Board will have regard at the relevant time to
the best interests of the Company in determining the application of cash
resources and where other applications are required or seem appropriate, such
as in other investments or the repayment of debt, the cash will be applied
accordingly. In addition, the decision by the Company to undertake any purchase
of its Ordinary Shares under the new strategy will be a matter determined by
the Board with the consent of the Company's Investment Adviser, Jordan/
Zalaznick Advisers, Inc.
The new strategy will be kept under review by the Board, particularly with
regard to the level of the discount to net asset value of the Company's
Ordinary Shares. When the discount no longer justifies the continuation of the
strategy the Board will consider returning to the payment of dividends.
As a consequence of the proposed changes, the dividend policy will, subject to
the requisite approvals being obtained, be discontinued and the Company will at
the same time adopt the new strategy. Accordingly, the Company does not intend
to declare or pay a second interim dividend to Ordinary Shareholders for the
financial year ending 28 February 2017.
Related Recommended Proposals
The implementation of the new strategy, and specifically the ability of the
Company to purchase its Ordinary Shares under that strategy, requires the
Company to submit a number of related recommended Proposals to Shareholders as
well as to the holders of the Company's convertible unsecured subordinated loan
stock (which are referred to in this announcement as the "CULS").
Details of the Proposals are set out in a Circular the Company is posting to
Shareholders in connection with the Proposals and, in the case of the CULS
Holders, a separate Circular to CULS Holders which the Company is posting
separately to those holders.
The Proposals are as follows:
Articles Amendments
The Company is proposing to amend its Articles of Incorporation by approving
and adopting new Articles in substitution for, and to the exclusion of, the
Company's existing Articles.
Such amendments (which are referred to in this announcement as the "Articles
Amendments") principally concern:
1. Class rights of ZDP Shares
Amendments to allow the Company to pass, without the sanction of ZDP
Shareholders, any resolution(s) at any time and from time to time authorising
the purchase of any class or classes of Shares by the Company made pursuant to
any such resolution(s).
Each such resolution, which would be required to be passed to allow the Company
to make purchases of its Shares including its Ordinary Shares under the new
strategy, will be limited to:
a. Market Acquisition Authority: a general authority of Ordinary Shareholders
to make Market Acquisitions (within the meaning of the Guernsey Companies Law)
of Shares where the maximum number of Shares in each class that may be
purchased is equal to or less than 15 per cent of the Shares of that class
(which is referred to in this announcement as a "Market Acquisition Authority"
); and
b. Off-Market Acquisition Authority: an authority of Ordinary Shareholders
pursuant to the Guernsey Companies Law of the terms of a contract to be
included in the Articles as prescribed therein for the Company to make
Off-Market Acquisitions (being acquisitions other than under a Market
Acquisition) of Ordinary Shares in pursuance of the terms of that contract
(which is referred to in this announcement as an "Off-Market Acquisition
Authority").
A resolution in respect of an Off-Market Acquisition Authority would be needed
in conjunction with a resolution concerning a Market Acquisition Authority to
allow the Company to purchase its Ordinary Shares and to reduce the risk when
doing so of the Company being or becoming a Controlled Foreign Corporation for
the reasons set out below in this announcement.
Any purchases of the Company's Ordinary Shares under the new strategy are
intended to be made pursuant to Market Acquisition Authority and, subject to
the passing of an Off-Market Acquisition Authority, in pursuance of the terms
of the above mentioned contract.
A Market Acquisition Authority will if approved authorise the Company to
purchase up to a maximum number of Ordinary Shares and ZDP Shares representing
approximately 14.99 per cent of each class of those Shares. However, whilst any
Market Acquisition Authority will provide the Company with the flexibility to
purchase both of its Ordinary Shares and ZDP Shares, the Company does not
currently have an intention to make purchases of its ZDP Shares. In addition,
should the Company decide to purchase any of its Ordinary Shares including
under the new strategy, the Company's intention is only to use any Market
Acquisition Authority to purchase up to a number of Ordinary Shares (including,
subject to the passing of an Off-Market Acquisition Authority, any Ordinary
Shares purchased in pursuance of the terms of the above mentioned contract) in
respect of which the aggregate cost of such Ordinary Shares so purchased in any
given period for which the Company has the requisite authorities to make such
purchases is not more than an amount equal to three per cent of the Company's
net assets (before dividends) as shown by the Company's published audited
accounts for the financial year prior to that period (which is referred to in
this announcement as "3 per cent of NAV"). Such amount shall, for each given
period after the expiry of the first, include the unused amount(s) (if any) of
any prior period(s) in addition to the 3 per cent of NAV for such period.
2. Controlled Foreign Corporation
Amendments designed to reduce the risk of the Company being or becoming a
Controlled Foreign Corporation in circumstances where the Company decides to
purchase its Ordinary Shares including under the new strategy.
Such amendments are required as Controlled Foreign Corporation status may be
effected by increases of percentage shareholdings resulting from purchases by
the Company of its Ordinary Shares or reductions of capital relating to
Ordinary Shares and because the Articles (including the existing US ownership
and transfer restrictions contained therein) do not currently apply to, nor do
they cater for, any such increases.
The proposed amendments include:
a. CFC Buy Back Arrangement
The amendment of the Articles to include an arrangement (which is referred to
in this announcement as the "CFC Buy Back Arrangement") which shall constitute
a contract for the Company to make purchases of Ordinary Shares in pursuance of
the terms of that contract.
The Articles as proposed to be amended to include the CFC Buy Back Arrangement
will require an Off-Market Acquisition Authority in order to authorise any
purchases of Ordinary Shares made in pursuance of its terms. The CFC Buy Back
Arrangement will also only apply in the case of any purchase of Ordinary Shares
made pursuant to a Market Acquisition Authority. Accordingly, any purchases by
the Company of Ordinary Shares including under the new strategy will be made
pursuant to a Market Acquisition Authority and, subject to the passing of an
Off-Market Acquisition Authority, in pursuance of the terms of the Articles as
prescribed by the CFC Buy Back Arrangement to be included therein.
In relation to the CFC Buy Back Arrangement to be included in the Articles, the
arrangement will apply to:
i. Exceeding Shareholders: certain large Ordinary Shareholders who are also US
Holders, being each of those Ordinary Shareholders defined in the Articles as
an Exceeding Shareholder; and
ii. CFC Limited Shareholders: each other US Holder who the Board determines, in
its absolute discretion, might breach the 9.9 per cent limit in the Articles
(which limits Constructively Ownership to no more than 9.9 per cent of the
Ordinary Shares in issue) immediately after giving effect to any purchases of
Ordinary Shares pursuant to a Market Acquisition Authority (who are referred to
in this announcement as a "CFC Limited Shareholder" and, together with the
Exceeding Shareholders, as the "CFC Buy Back Arrangement Shareholders").
In the case of any purchase of Ordinary Shares by the Company made pursuant to
a Market Acquisition Authority, the CFC Buy Back Arrangement will require,
unless the Board determines otherwise, in its absolute discretion (and subject
to the passing of an Off-Market Acquisition Authority), that each CFC Buy Back
Arrangement Shareholder shall be required to sell to the Company (and the
Company shall buy from each such CFC Buy Back Arrangement Shareholder), such
number of their Ordinary Shares that the Board determines, in its absolute
discretion, would be necessary or desirable in order to prevent any such
purchases made pursuant to such Market Acquisition Authority from resulting in:
i. For each Exceeding Shareholder, that Exceeding Shareholder increasing its
percentage holding of Ordinary Shares; and
ii. For each CFC Limited Shareholder, that CFC Limited Shareholder exceeding
the 9.9 per cent limit in the Articles.
The Ordinary Shares required to be purchased under the CFC Buy Back Arrangement
(which are referred to in this announcement together as the "CFC Buy Back
Arrangement Shares") will be determined on a daily basis and executed following
and as soon as reasonably practicable after completing the execution of all
purchases of Ordinary Shares pursuant to such Market Acquisition Authority on
that day on which such purchases pursuant to such Market Acquisition Authority
are agreed.
The price that each CFC Buy Back Arrangement Shareholder will be entitled to
receive and that will be paid by the Company to each of them in respect of each
of their respective CFC Buy Back Arrangement Shares determined as being
required to be purchased under the CFC Buy Back Arrangement in respect of any
given day shall be the volume weighted average price payable per Ordinary Share
in respect of the Ordinary Shares agreed to be purchased by the Company on that
day pursuant to such Market Acquisition Authority.
For the purpose of giving effect to purchases of CFC Buy Back Arrangement
Shares under the CFC Buy Back Arrangement, any Director may (or the Board may
appoint any person that the Board so authorises from time to time to) effect
those purchases on behalf of each CFC Buy Back Arrangement Shareholder.
It should be noted that the purpose of the CFC Buy Back Arrangement is to
reduce the risk of the Company being or becoming a Controlled Foreign
Corporation and is not being proposed for any other reason.
b. US ownership and transfer restrictions
The amendment of the existing US ownership and transfer restrictions contained
in the Articles that relate to Controlled Foreign Corporations including forced
sale provisions such that those restrictions apply to increases of percentage
shareholdings resulting from any purchases by the Company of its Ordinary
Shares and also to any reductions of capital relating to Ordinary Shares.
Such amendments will apply to any type of purchase by the Company of its
Ordinary Shares if and to the extent that the terms of the CFC Buy Back
Arrangement to be included in the Articles do not apply or have not been
complied with as well as to any reductions of capital relating to Ordinary
Shares by the Company.
The amendments are intended to provide a further safeguard against, and to
reduce the risk of, the Company being or becoming a Controlled Foreign
Corporation in addition to the other safeguard which is proposed to be provided
by the CFC Buy Back Arrangement
Buy Back Authorities
The Company is also proposing to pass a Market Acquisition Authority and an
Off-Market Acquisition Authority (which are referred to in this announcement as
the "Market Acquisition Buy Back Authority" and the "Off Market Acquisition Buy
Back Authority" respectively and together as the "Buy Back Authorities") which
are needed by the Company to make purchases of its Shares including its
Ordinary Shares under the new strategy.
The Market Acquisition Authority is a general authority of Ordinary
Shareholders to make Market Acquisitions of Shares where the maximum number of
Shares in each class that may be purchased is equal to or less than 15 per cent
of the Shares of that class. The Off-Market Acquisition Authority is an
authority of Ordinary Shareholders pursuant to the Guernsey Companies Law of
the terms of a contract to be included in the Articles as prescribed by the CFC
Buy Back Arrangement to be included therein for the Company to make Off-Market
Acquisitions of Ordinary Shares in pursuance of the terms of that contract.
The Off-Market Acquisition Buy Back Authority is needed in conjunction with the
Market Acquisition Buy Back Authority for reasons related to Controlled Foreign
Corporation status set out above in this announcement. Specifically, the
Articles as proposed to be amended to include the CFC Buy Back Arrangement,
which applies in the case of purchases of Ordinary Shares by the Company made
pursuant to a Market Acquisition Authority, also requires an Off-Market
Acquisition Authority in order to authorise any such purchases made in
pursuance of the terms of the Articles as prescribed by the CFC Buy Back
Arrangement to be included therein. As such, any purchases by the Company of
Ordinary Shares will be made pursuant to the Market Acquisition Buy Back
Authority and, in the case of any such purchases made in pursuance of the terms
of the Articles as prescribed by the CFC Buy Back Arrangement to be included
therein, the Off Market Acquisition Buy Back Authority.
Each of the Buy Back Authorities are intended by the Company to remain in place
until the Annual General Meeting of the Company in 2018 and so will not need to
be renewed at the upcoming 2017 Annual General Meeting. However, it is intended
by the Company for each of the Buy Back Authorities to be renewed at the 2018
Annual General Meeting and at each Annual General Meeting thereafter.
Accordingly, any purchases of the Company's Ordinary Shares under the new
strategy are intended to be made pursuant to the Market Acquisition Buy Back
Authority (or any future Market Acquisition Authority) and, subject to the
passing of the Off-Market Acquisition Buy Back Authority (or any future
Off-Market Acquisition Authority), in pursuance of the terms of the Articles as
prescribed by the CFC Buy Back Arrangement to be included therein.
As mentioned above in this announcement, it should be noted that whilst the
Market Acquisition Buy Back Authority (and any future Market Acquisition
Authority) will if approved authorise the Company to purchase up to a maximum
number of Ordinary Shares and ZDP Shares representing approximately 14.99 per
cent of each class of those Shares, the Company does not currently have an
intention make purchases of its ZDP Shares. In addition, should the Company
decide to purchase any of its Ordinary Shares including under the new strategy,
the Company's intention is only to use the Market Acquisition Buy Back
Authority (or any future Market Acquisition Authority) to purchase up to a
number of Ordinary Shares (which shall include, subject to the passing of the
Off-Market Acquisition Buy Back Authority (or any future Off-Market Acquisition
Authority), any Ordinary Shares purchased in pursuance of the terms of the
Articles as prescribed by the CFC Buy Back Arrangement to be included therein)
subject to the parameters described above in this announcement.
It should also be noted that the decision by the Company to undertake any
purchase of its Ordinary Shares so authorised by the Buy Back Authorities (or
any future Market Acquisition Authority or any Off-Market Acquisition
Authority) including under the new strategy will be a matter determined by the
Board with the consent of the Company's Investment Adviser.
CFC Related Party Transaction
Finally, the CFC Buy Back Arrangement as described above in this announcement
as far as it concerns any purchase at any time and from time to time by the
Company of any of its Ordinary Shares from the CFC Buy Back Arrangement
Shareholders who are Exceeding Shareholders on the terms of the CFC Buy Back
Arrangement would be considered Related Party Transactions (insofar as the
Listing Rules are applicable to the Company by virtue of its voluntary
compliance with the same).
This is because the Exceeding Shareholders would be considered Related Parties
of the Company and the CFC Buy Back Arrangement insofar as it concerns
purchases from the Exceeding Shareholders would be considered to be
transactions or arrangements between the Company and Related Parties. The
Related Parties are the founders of the Company's Investment Advisor, David W.
Zalaznick and John (Jay) W. Jordan II, as well as one of the Company's major
Shareholders, Edgewater Growth Capital Partners.
As a consequence, the Company is proposing to approve any Related Party
Transaction resulting from any purchase at any time and from time to time by
the Company of any of its Ordinary Shares from such Related Parties on the
terms of the CFC Buy Back Arrangement (which are referred to in this
announcement as a "CFC Related Party Transaction").
For the avoidance of doubt, the approval being sought is to apply to and
approve any CFC Related Party Transaction on the terms of the CFC Buy Back
Arrangement resulting from any future purchase at any time and from time to
time whether effecting that arrangement is authorised by the Off-Market
Acquisition Buy Back Authority (or any future Off-Market Acquisition Authority)
and so such approval, if obtained, will not be required to be sought again.
CULS Holders should be aware that nothing in any of the Proposals described
above in this announcement shall require the conversion price of the CULS to be
adjusted.
Circular and Circular to CULS Holders
Copies of the Circular (containing the Notices of Separate General Meetings and
the Notice of Extraordinary General Meeting) are being posted to Shareholders
and, in the case of the CULS Holders, the separate Circular to CULS Holders
(containing the Notice of Meeting of CULS Holders) is being posted separately
to CULS Holders. Copies will also be available for viewing, during normal
business hours, at the registered office of the Company at Trafalgar Court, Les
Banques, St Peter Port, Guernsey GY1 3QL and, in the case of separate Circular
to CULS Holders, also at the registered office of Equiniti Limited at Aspect
House, Spencer Road, Lancing, West Sussex BN99 6DA, United Kingdom. The
Circular and the separate Circular to CULS Holders have also been submitted to
the National Storage Mechanism and will shortly be available for viewing at
www.hemscott.com/nsm.do and the Company's website at www.jzcp.com.
Meeting of CULS Holders, Separate General Meetings and Extraordinary General
Meeting
The Meeting of CULS Holders, the Separate General Meetings and the
Extraordinary General Meeting have been called and in respect of which the
relevant notices and further details of the resolutions to be proposed at those
meetings are set out in the Circular and the separate Circular to CULS Holders,
as applicable.
Each of the Separate General Meetings and the Extraordinary General Meeting
will be held at the offices of Northern Trust International Fund Administration
Services (Guernsey) Limited, Trafalgar Court, Les Banques, St Peter Port,
Guernsey, Channel Islands. The Meeting of CULS Holders will be held in England
at the offices of Ashurst LLP, Broadwalk House, 5 Appold Street, London EC2A
2HA.
Meeting of CULS Holders
The Meeting of CULS Holders will be held at 10.30 a.m. (London time) on 16 May
2017. The Articles Amendments are subject to the approval of CULS Holders and
the resolution to be proposed at that meeting concerns those amendments.
Separate General Meeting of Ordinary Shareholders
The Separate General Meeting of Ordinary Shareholders will be held at 10.35
a.m. (London time) on 16 May 2017 (or as soon thereafter as the Meeting of CULS
Holders convened for the same day but different place has been concluded or
adjourned). The Articles Amendments are subject to the approval of Ordinary
Shareholders and the resolution to be proposed at that meeting concerns those
amendments.
Separate General Meeting of ZDP Shareholders
The Separate General Meeting of ZDP Shareholders will be held at 10.40 a.m.
(London time) on 16 May 2017 (or as soon thereafter as the Separate General
Meeting of Ordinary Shareholders convened for the same day and place has been
concluded or adjourned). The Articles Amendments are subject to the approval of
ZDP Shareholders and the resolution to be proposed at that meeting concerns
those amendments.
Extraordinary General Meeting
The Extraordinary General Meeting will be held at 10.45 a.m. (London time) (or
as soon thereafter as the Separate General Meeting of ZDP Shareholders convened
for the same day and place has been concluded or adjourned) on 16 May 2017. The
Articles Amendments are subject to the approval of Ordinary Shareholders and
the ZDP Shareholders, the separate Buy Back Authorities ae subject to the
approval of Ordinary Shareholders and any CFC Related Party Transaction on the
terms of the CFC Buy Back Arrangement is subject to the approval of Ordinary
Shareholders, and the resolutions to be proposed at the Extraordinary General
Meeting concern each of those matters.
In addition to each of the above requisite approvals, the Articles Amendments
are also conditional on the passing of the resolution to be proposed at the
Extraordinary General Meeting concerning any CFC Related Party Transaction on
the terms of the CFC Buy Back Arrangement. Each of the separate Buy Back
Authorities are also conditional on the passing of the resolution to be
proposed at Extraordinary General Meeting concerning the Articles Amendments.
Shareholders should also be aware that the discontinuation of the Company's
existing dividend policy is not the subject of any of the Proposals nor of any
of the approvals being sought from Shareholders or CULS Holders. The
discontinuation of the dividend policy is however conditional on such
approvals.
In connection with the above requisite approvals, the Board can confirm that
that Company has received irrevocable undertakings from certain of the
Shareholders to vote in favour of the resolutions to be proposed at the
Separate General Meetings and the Extraordinary General Meeting and certain of
the CULS Holders to vote in favour of the resolution to be proposed at the
Meeting of CULS Holders. Details of the irrevocable undertakings received in
respect of each of those resolutions are set out in the Circular and the
separate Circular to CULS Holders.
This announcement contains inside information.
Unless defined herein, capitalised terms used in this announcement shall have
the meaning attributed to them in the Circular or the separate Circular to CULS
Holders, as applicable.
For further information:
William Simmonds +44 (0)20 7742 4000
J.P. Morgan Cazenove
Ed Berry / Kit Dunford +44 (0) 20 3727 1046 / 1143
FTI Consulting
David Macfarlane
JZ Capital Partners Limited
David Zalaznick +1 (212) 485 9410
Jordan/Zalaznick Advisers, Inc.
Rebecca Booth +44 (0)1481 745189
Northern Trust International Fund
Administration Services (Guernsey)
Limited
About JZCP
JZCP is a London listed fund which invests in US and European micro-cap
companies and US real estate. Its objective is to achieve an overall return
comprised of a current yield and capital appreciation. JZCP receives investment
advice from Jordan/Zalaznick Advisers, Inc. ("JZAI") which is led by David
Zalaznick and Jay Jordan. They have worked together for 30 years and are
supported by teams of investment professionals in New York, Chicago, London and
Madrid. JZAI's experts work with the existing management of micro-cap companies
to help build better businesses, create value and deliver strong returns for
investors. JZCP also invests in mezzanine loans, first and second lien
investments and other publicly traded securities. For more information please
visit www.jzcp.com.
JZ CAPI ZDRP : Capital Partners Ltd - Discontinuation of Dividend Policy and New Strategy
April 20, 2017 at 11:31 am IST
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